In a response to an October 11 Freedom of Inforamtion Act request, ABA has obtained a list from NCUA of credit unions that were either chartered for the purpose of making member business loans or have a history of primarily making member business loans.
Click on this link to see the list.
Friday, January 13, 2012
Wednesday, January 11, 2012
Wind-Down Letter for U.S. Central Bridge
Almost 3 years after seizing control of the operations of U.S. Central FCU, NCUA has started to write the final chapter of this failed corporate credit union.
On January 10, NCUA sent a letter to its members on the orderly wind-down of the wholesale corporate credit union's services.
The letter notes that NCUA is seeking to minimize service disruptions, while at the same time minimizing the cost to the Temporary Corporate CU Stabilization Fund.
The letter specifically mentions ACH processing through the APEX platform. ACH processing and pricing will remain status quo through June 30, 2012. On July 1, 2012, ACH pricing will be increased by 80 percent. The ACH operations will cease no later than the end of 2012.
Each U.S. Central bridge member are required to develop a plan and timeline for executing its transition from U.S. Central Bridge. The plan must be completed and submitted to the Office of Corporate Credit Unions by February 24, 2012.
On January 10, NCUA sent a letter to its members on the orderly wind-down of the wholesale corporate credit union's services.
The letter notes that NCUA is seeking to minimize service disruptions, while at the same time minimizing the cost to the Temporary Corporate CU Stabilization Fund.
The letter specifically mentions ACH processing through the APEX platform. ACH processing and pricing will remain status quo through June 30, 2012. On July 1, 2012, ACH pricing will be increased by 80 percent. The ACH operations will cease no later than the end of 2012.
Each U.S. Central bridge member are required to develop a plan and timeline for executing its transition from U.S. Central Bridge. The plan must be completed and submitted to the Office of Corporate Credit Unions by February 24, 2012.
Tuesday, January 10, 2012
More on PCA
A recently released Government Accountability Office (GAO) study provided some interesting insights into NCUA's implementation of prompt corrective action (PCA).
According to the GAO, 560 credit unions between January 1, 2006 and June 30, 2011 triggered PCA with the vast majority (452) occurring after the beginning of 2008.
In general, most credit unions subjected to PCA do not fail; but also a sizable number were no longer independent. GAO tracked the performance of a sample of 275 credit unions subject to PCA from January 1, 2008 through June 30, 2009. It found that 61 percent of these credit unions were no longer independent as of June 30, 2011. Forty percent were merged into stronger credit unions, 19 percent failed, and 2 percent voluntarily liquidated.
Among the remaining 39 percent still in business, slightly more than one-third were still subject to PCA.
The report further found that NCUA's application of PCA became more timely. For credit unions triggering PCA from January 2006 to December 2007, approximately 43 percent were significantly or critically undercapitalized. For credit unions entering PCA after January 1, 2008, less than a quarter (23 percent) were significantly or critically undercapitalized.
While GAO acknowledged an improvement in NCUA's application of PCA, it also found inconsistencies with regard to its implementation. Specifically, GAO noted that almost 19 percent of the credit unions that failed between the beginning of 2008 and the middle of 2011 were not subject to PCA. The report further noted that of the 69 failed credit unions that triggered PCA, many did so at lower capital levels than credit unions that triggered PCA as a whole. In fact, 55 percent of failed credit unions initially triggered PCA at the significantly or critically undercapitalized level. Furthermore, in most cases, PCA was not initiated until less than 180 days prior to failure -- limiting its effectiveness.
The study concluded that tying mandatory corrective actions to only capital-based indicators has drawbacks, as capital-based indicators lag behind other indicators of financial distress.
According to the GAO, 560 credit unions between January 1, 2006 and June 30, 2011 triggered PCA with the vast majority (452) occurring after the beginning of 2008.
In general, most credit unions subjected to PCA do not fail; but also a sizable number were no longer independent. GAO tracked the performance of a sample of 275 credit unions subject to PCA from January 1, 2008 through June 30, 2009. It found that 61 percent of these credit unions were no longer independent as of June 30, 2011. Forty percent were merged into stronger credit unions, 19 percent failed, and 2 percent voluntarily liquidated.
Among the remaining 39 percent still in business, slightly more than one-third were still subject to PCA.
The report further found that NCUA's application of PCA became more timely. For credit unions triggering PCA from January 2006 to December 2007, approximately 43 percent were significantly or critically undercapitalized. For credit unions entering PCA after January 1, 2008, less than a quarter (23 percent) were significantly or critically undercapitalized.
While GAO acknowledged an improvement in NCUA's application of PCA, it also found inconsistencies with regard to its implementation. Specifically, GAO noted that almost 19 percent of the credit unions that failed between the beginning of 2008 and the middle of 2011 were not subject to PCA. The report further noted that of the 69 failed credit unions that triggered PCA, many did so at lower capital levels than credit unions that triggered PCA as a whole. In fact, 55 percent of failed credit unions initially triggered PCA at the significantly or critically undercapitalized level. Furthermore, in most cases, PCA was not initiated until less than 180 days prior to failure -- limiting its effectiveness.
The study concluded that tying mandatory corrective actions to only capital-based indicators has drawbacks, as capital-based indicators lag behind other indicators of financial distress.
Friday, January 6, 2012
NCUA Conserves Pennsylvania Community Development CU
The National Credit Union Administration (NCUA) assumed control of service and operations at People for People Community Development Credit Union (CDCU) in Philadelphia.
People for People CDCU served 1,561 members and had $1.1 million in assets.
The low-income designated credit union was significantly undercapitalized as of September with a net worth ratio of 3.63%. The credit union reported a loss of almost $30,000 for the first 3 quarters of 2011.
As of September 2011, 16.64% of its loans were 60 days or more past due.
Read the press release.
People for People CDCU served 1,561 members and had $1.1 million in assets.
The low-income designated credit union was significantly undercapitalized as of September with a net worth ratio of 3.63%. The credit union reported a loss of almost $30,000 for the first 3 quarters of 2011.
As of September 2011, 16.64% of its loans were 60 days or more past due.
Read the press release.
Wednesday, January 4, 2012
GAO Study on Supervison of Corporate CUs and Implementation of PCA
Legislation enacted in 2011 (Public Law 111-382) instructed the Government Accountability Office (GAO) to conduct a study of the National Credit Union Administration’s supervision of corporate credit unions and implementation of prompt corrective action (PCA).
GAO examined the failures of 5 corporate credit unions and 85 credit unions from January 1, 2008 through June 30, 2011.
The report found that poor investment and business strategies contributed to the corporate credit union failures. The study notes that NCUA took a number of steps to stabilize, resolve, and reform the corporate credit union system. However, GAO found:
In the 85 credit union failures, GAO cited poor management as a key factor.
*Operation risk was cited in 76 of the failures.
*Fraud or alleged fraud at credit unions contributed to 29 of the 85 credit union failures.
*Credit risk played a role in 58 credit union failures.
*Business lending played a role in 13 credit union failures. GAO found that failed credit unions had more business loans as a percentage of assets than peer credit unions that did not fail or the credit union industry.
*Liquidity risk contributed to 31 of the 85 credit union failures.
*Concentration risk was cited in 27 of the failures.
GAO found mixed results with respect to the implementation of PCA and also discovered that other enforcement actions were initiated either too late or not at all for many of the failed credit unions. For example, in 49.4 percent of the 85 credit union failures, "NCUA did not take any formal or informal enforcement action (non-PCA) on credit unions within 2 years prior to their failure." In a another 14.1 percent of the failures, an initial formal or informal non-PCA enforcement action did not occur until 180 days or less before the failure.
GAO recommended that NCUA should (1) provide its Office Inspector General the necessary documentation to verify loss estimates and (2) consider additional triggers for PCA that would require early and forceful regulatory action and make recommendations to Congress on how to modify PCA, as appropriate.
Read the report.
GAO examined the failures of 5 corporate credit unions and 85 credit unions from January 1, 2008 through June 30, 2011.
The report found that poor investment and business strategies contributed to the corporate credit union failures. The study notes that NCUA took a number of steps to stabilize, resolve, and reform the corporate credit union system. However, GAO found:
"While NCUA has estimated the losses to the Stabilization Fund, it could not provide adequate documentation to allow NCUA’s Office of Inspector General or GAO to verify their completeness and reasonableness. Without well-documented cost information, NCUA faces questions about its ability to effectively estimate the total costs of the failures and determine whether the credit unions will be able to pay for these losses."[emphasis added]
In the 85 credit union failures, GAO cited poor management as a key factor.
*Operation risk was cited in 76 of the failures.
*Fraud or alleged fraud at credit unions contributed to 29 of the 85 credit union failures.
*Credit risk played a role in 58 credit union failures.
*Business lending played a role in 13 credit union failures. GAO found that failed credit unions had more business loans as a percentage of assets than peer credit unions that did not fail or the credit union industry.
*Liquidity risk contributed to 31 of the 85 credit union failures.
*Concentration risk was cited in 27 of the failures.
GAO found mixed results with respect to the implementation of PCA and also discovered that other enforcement actions were initiated either too late or not at all for many of the failed credit unions. For example, in 49.4 percent of the 85 credit union failures, "NCUA did not take any formal or informal enforcement action (non-PCA) on credit unions within 2 years prior to their failure." In a another 14.1 percent of the failures, an initial formal or informal non-PCA enforcement action did not occur until 180 days or less before the failure.
GAO recommended that NCUA should (1) provide its Office Inspector General the necessary documentation to verify loss estimates and (2) consider additional triggers for PCA that would require early and forceful regulatory action and make recommendations to Congress on how to modify PCA, as appropriate.
Read the report.
Supervisory Focus for 2012
NCUA issued a letter to all federally insured credit unions with regard to its supervisory focus for 2012.
In the letter, NCUA stated that it "will focus supervisory efforts on credit unions with elevated levels of credit risks, interest rate risks, liquidity risks, and concentration risks."
Read the letter.
In the letter, NCUA stated that it "will focus supervisory efforts on credit unions with elevated levels of credit risks, interest rate risks, liquidity risks, and concentration risks."
Read the letter.
Monday, January 2, 2012
United FCU Completes Purchase of Griffith Savings Bank
United Federal Credit Union, headquartered in St. Joseph, Michigan, announced that its purchase of the assets and deposits of Griffith Savings Bank, headquartered in Griffith, Indiana, has been completed effective January 1, 2012. The purchase marks the first time a federally chartered credit union has purchased the assets and deposits of a state-chartered, FDIC-insured mutual savings bank.
Read more here.
Read more here.
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